India's wholesale food prices rise fastest in 11 years

New Delhi : India's wholesale food prices rose at the fastest pace in 11 years, making it more likely that the central bank will raise borrowing costs to curb inflation.

An index of food articles compiled by the Commerce Ministry increased 19.95 per cent in the week ended December 5 from a year earlier, following a 19.05 per cent gain in the previous week. A measure of fuel and electricity prices rose 3.95 per cent, the ministry said in a statement in New Delhi yesterday.

Policymakers in Asia have started to exit monetary stimulus as the global economic recovery causes the focus to shift from reviving growth to fighting inflation. Australia and Vietnam have already begun raising interest rates as inflation accelerates across Asia, with China's consumer prices rising for the first time in 10 months in November.

"When growth is subdued, inflation can be ignored," Sonal Varma, a Mumbai-based economist at Nomura Holdings Inc., Japan's largest brokerage, said. "However, with both growth and inflation surprising on the upside, we believe that a policy action is imminent."

Fastest pace

India's economy expanded 7.9 per cent in the three months to September 30 from a year earlier, the fastest pace in a year and a half, giving policymakers room to shift their focus to soaring food inflation that threatens to undermine the popularity of Prime Minister Manmohan Singh.

Singh got re-elected this year on promises to alleviate poverty in a nation where about 800 million people live on less than $2 a day.

Ineffective

Opposition lawmakers yesterday accused the government of being ineffective in tackling soaring food prices and disrupted parliament, forcing the speaker of the lower house to adjourn for the day.

A panel of Indian lawmakers said in a report presented to parliament today that the government "failed to intervene" in a timely manner to address this "burning issue."

The standing committee of finance demanded a probe into the surge in sugar prices and suggested developing a mechanism to provide food items directly to consumers to overcome hoarding.

The Reserve Bank of India is scheduled to review interest rates on January 29.